UK-headquartered Amec, the international engineering and project management company, has announced that it has provisionally agreed an outline £1.9 billion takeover deal with Foster Wheeler.

The making of a firm offer remains subject to a number of pre-conditions, including the satisfactory completion of confirmatory due diligence by both parties, completion of debt financing arrangements by Amec and unanimous recommendation by the board of Foster Wheeler.

Under the terms of the deal, Amec would pay £968m in cash and the remainder in shares, giving Foster Wheeler shareholders 23% of the enlarged company.

Foster Wheeler has agreed not to solicit alternative proposals until 22 February 2014 by which time it is expected that definitive agreements will be entered into. Completion is anticipated in the second half of 2014, subject to AMEC shareholder approval and regulatory and anti-trust approvals. 

Uk engineering company Amec has provisionally agreed a £1.9bn takeover of its swiss rival Foster Wheeler 

Foster Wheeler is a US Nasdaq listed company but its operational headquarters are in Reading. Both companies are major engineering, procurement & construction (EPC) contractors in the energy and oil & gas sectors.

Amec is proposing to pay £968m in cash and the remainder in shares that would give Foster Wheeler shareholders 23% of the enlarged company.

The Amec Board described the combination of the two businesses as “a compelling proposition for all shareholders” which would position AMEC to serve across the whole oil and gas value chain, adding mid and downstream capabilities to AMEC's existing upstream focus.

Other key benefits of the proposed combination include:

• Improved geographic footprint, more than doubling AMEC's current revenues in the Growth Regions, increasing AMEC's Latin America exposure and bringing scale benefits
• Annual cost synergies, estimated by AMEC to be at least $75 million, and additional significant tax and revenue synergies
• Retaining AMEC's low-risk and cash generative business model. Foster Wheeler has a similar business model, with predominantly cost-plus contracting and an asset-light engineering and project management business
• Combining two highly skilled workforces with industry-leading engineering and project management expertise
• Adding a robust and profitable power equipment business with a solid backlog of orders.

AMEC Chief Executive Samir Brikho said:

"The combination of our two businesses, AMEC and Foster Wheeler, would be financially and strategically attractive. As well as positioning us across the whole oil & gas value chain and providing scale in our Growth Regions, we would expect double-digit earnings enhancement in the first twelve months. I believe it would be a compelling proposition for our shareholders, customers and employees."